Year: 2005

COUNTRY FUNDS

Arjun Divecha is one smart dude. In this Business Standard interview, he shares his assessment of various international stock markets. These days, he’s overweighting Korea, Brazil, Taiwan and Turkey; underweighting Russia, India, Israel and South Africa. This gives me heart to hang on to our nicely appreciated shares of BZF and KF, both of which sell at slight discounts to their net asset values (as they should, because we suffer an expense charge each year) . . . and to take profits in TRF and IFN, both of which are selling at premiums to their net asset value (despite the expense charge) – like dollar bills that sell for $1.10 each.

The Dow is dead even with its level on January 20, 2001. BZF has more than doubled since then, IFN and KF have roughly tripled, TRF has quadrupled.

Tax cuts for the wealthy were sold as necessary to get the American economy humming. But the smart money took their huge tax cuts (which we added to the National Debt) and invested it overseas.

MUTUAL FUNDS

Here‘s a site, FundAlarm, dedicated to helping you decide when to sell a fund. I referred to it a few weeks ago with regard to TIAA-CREF’s public funds. Now comes this update:

Back in August, we reported that TIAA-CREF was asking shareholders at 23 of its mutual funds to approve either large, very large, or obscene increases in the management fees that TIAA-CREF would be allowed to charge…..TIAA-CREF claimed that it had unintentionally low-balled the funds’ management fees when they were first introduced, and the funds had been money-losers ever since…..To their immense credit, and to the surprise of almost everyone who watches mutual funds, shareholders at nine of the TIAA-CREF funds rejected the increased management fees, and now the fate of those funds is in question…..TIAA-CREF had threatened to liquidate or merge any fund that wasn’t allowed to increase its fees, and that may yet happen…..We have a better idea, especially if TIAA-CREF tries to follow through with its liquidation threat: Let the funds’ trustees (directors) step forward, and arrange for a merger of the rebellious TIAA-CREF funds with similar Vanguard offerings…..Fund expense ratios will probably go down, shareholders will finally get the quality company they thought they were getting with TIAA-CREF, and shareholders won’t have to deal with the potentially undesirable consequences of a forced liquidation…..In fact, if push comes to shove, it’s difficult to imagine how the trustees could properly do their job and not consider some kind of deal with Vanguard.

PLAYING FAIR ON TOBACCO

Yesterday, in commenting on the new House Majority Leader, I asked, what does it say about the Republican leadership that its kids go to work lobbying for Philip Morris, that it marries Philip Morris lobbyists, and that it does what it can to promote the interests of Philip Morris’

David D’Antonio: ‘I have no love for tobacco companies, having lost both parents to lung cancer. But fair is still fair and the ‘Republican leadership’ isn’t doing any such thing; one person did it. Last I checked Bush wasn’t married to any Philip Morris lobbyist, nor was Cheney. You may not like or approve of what the current administration is doing (I certainly don’t approve of a lot of it) but if you want to be treated fairly, you owe them the same courtesy.’

☞ I agree. But the Bushes are friendly to tobacco interests as well – click here. And the Doles have long had very close tobacco ties. And all that’s legal; just a different set of priorities from the Democrats. Here’s what I wrote in 1997:

To me, there is something fundamentally different between, say, the Doles’ long-time financial support from the tobacco industry, and Elizabeth Dole, when she was Secretary of Transportation, delaying the ban on smoking in airplanes . . . on the one hand . . . and the kind of support the Clintons have received from anti-tobacco activists . . .

Here is a site that shows the industry’s contributions by Party. In 1990, it was almost dead even. But once the Democratic leadership (Clinton/Gore) showed it was serious about this issue, working to mitigate the addiction of our children and seriously questioning the fine scientific research of the Tobacco Institute – look at what happened. Suddenly the giving went three or four to one to Republicans. As it should have, because the Republican leadership is more kindly disposed to the sale and promotion of cigarettes (and assault weapons) than the Democratic leadership. Depending on one’s point of view, that is a good thing or a bad thing. But it is, I think, a thing.

I’m taking a day off, but wanted to note that TXCO jumped to $6.56 yesterday, from $4.50 when suggested here February 16, 2004.

I sold half mine.

Back tomorrow . . .

11am EST: Well, or back now with second thoughts. I think I was dumb to sell half yesterday. The guy who brought this one to my attention in the first place told me he was selling a lot of his — and I think he may have been dumb also. My thinking had been simply that a 45% gain in a year and a half isn’t terrible, and this stock had been such a laggard in its group . . . well, “sell on the news,” and all that.

But look at the news: “NEW YORK (AP) — Shares of Exploration Co. of Delaware Inc. ran to a fresh 52-week high Wednesday on news that the company sold off about 20 percent of its production assets in the Maverick Basin for $80 million.”

This tells me that someone who actually knows something about oil thought 20% of TXCO’s assets were worth more than $80 million (if not, why pay $80 million?) — so the 80% TXCO has left may be worth more than $320 million. Yet at the current $7.50+ share price (up a buck dollar from where I sold half yesterday), the company is valued at less than $250 million (including its long-term debt).

Point being, I hope you didn’t sell half first thing this morning — because if you waited even an hour or so you would have made more like 65% than 45%. And I am not rushing to sell the rest.

Back to my day off.

DEWY DECIMALS

Judy: ‘Have you already found Library Thing? I think it’s pretty cool – a way to catalog your library online. A while back I considered buying a cataloging program but they seemed too expensive and/or too complex for my purposes but this is really cool. It’s in BETA and you can list up to 200 books free or pay a lifetime fee of ten bucks for unlimited listing. All sorts of neat features.’

THE WORK PENALTY

John Chamberlain: ‘Your little piece on the Work Penalty doesn’t tell half the story. Consider the case of a self-employed single mother with two children and a net income of $30,000 per year. Her marginal federal income tax rate is 15%, but she also has to pay 15.3% self-employment tax. (Being self-employed she gets to pay both the employer’s and the employee’s share of Social Security and Medicare taxes.) On top of that, her Earned Income Credit is ‘phased out’ at a rate of 21% of every additional amount she earns, so her total marginal tax rate is 51.3%.’

☞ True, but the Republican leadership believes that by eliminating the tax on $600 million estates our society will be more just. It’s a different way of looking at the world.

David McCorkhill: ‘Is it my imagination, or has it become the primary agenda of the modern Republican Party to create an American aristocracy? Based on their proposals for the estate tax, I could easily devise a family tax shelter for a super-wealthy clan (mere millionaires need not apply) which would virtually guarantee a large supply of money for all heirs at a vanishingly small tax rate (especially if the long-time dream of GOP tax-policy strategists of eliminating the tax on dividends were to be realized). It seems like some of these people are out to create a class of people supported by the rest of us who neither work nor pay taxes. Sounds like aristocracy to me.’

John Seiffer: ‘What most people who work for their money don’t know and too many of the wealthy won’t admit is that serious wealth is often due as much to luck or opportunity as it is to work. How hard did the heiress you mentioned work to choose her parents? Do the people on the Forbes 400 really work THAT much harder than the rest of us? Would Bill Gates [Forbes #1] be as wealthy if he’d been born in Uganda? or even France? Would Steve Balmer [#11] be as wealthy if he’d gone to Stanford rather than Harvard where he met Gates? Were the people who also invented the telephone, but were hours later to the patent office, more lazy than A.G. Bell or just less lucky? It makes sense to me that they should be taxed at least as much as those who work as hard but aren’t as lucky.’

☞ Not to mention the luck of being born good looking, the luck of being born smart, or the luck of being born healthy. All of which might be considered rewards in and of themselves, but which tend to lead to higher incomes – even after progressive taxation – as well.

The idea is certainly not to penalize people for their good fortune, but to ask them to shoulder more of society’s load. Yet not so much more as to kill incentives or take the fun out of the game. Taxation under Clinton/Gore struck what proved to be a very good balance. The rich got richer, the middle class prospered, millions were lifted from poverty, and the deficit disappeared.

Republican priorities are different, and as a result the rich have become much richer, middle class workers are earning about $1,700 a year less than they were five years ago (adjusted for inflation), millions have fallen back below the poverty line, and we have added trillions of dollars to our debt.

Another contrast is how Clinton/Gore professionalized FEMA – long a backwater of cronyism – and how the incoming Republican regime quickly restored it to its former state.

It is to that general theme that Molly Ivins addresses her latest column. If it starts out a little too sarcastic for your taste, press on anyway – you may find in it facts that will surprise you.

COMPETENCE
By Molly Ivins

AUSTIN, Texas — So here are all the liberals going into a giant snit just because George W. Bush appointed a veterinarian to head the women’s health section of the Food and Drug Administration. For Pete’s sake, you whiners, the only reason he chose the vet is because Michael Brown wasn’t available.

If you recall, Ol’ Heckuva-Job Brownie had to go home, walk his dog and then hug his wife after exhausting himself in his triumphal handling of Hurricane Katrina. Otherwise, he’d have been Bush’s first pick.

Now, even the veterinarian doesn’t get the job — just because those professional feminists raised such a stink. What’s wrong with a vet? They know a lot about birth and udders and stuff. If the mother is having trouble giving birth, you grab the baby by the legs and pull it out — it’s not brain surgery. Then you worm ’em, you tag ’em and you spray for fleas. Why the fuss?

The only reason Bush even needed a new head of the Office of Women’s Health is because the last one, Susan Wood, quit. She was upset because the political hacks who run the agency refused to allow over-the-counter sale of the emergency contraceptive pill Plan B.

True, that decision was made against the advice of the FDA’s own scientific advisory panel and will unquestionably result in more abortions and almost certainly damage to some women’s health. But why would anyone expect the Bush hacks to pay attention to scientific and clinical evidence, fully evaluated and recommended by the professional staff? Just like the folks at FEMA, they got their jobs because they know how to set up photo-ops for Bush.

There’s a doctoral dissertation to be written about Bush appointees named during the administration’s frequent fits of Petulant Pique. These PP appointments are made in the immortal childhood spirit of “nanny-nanny boo-boo, I’ll show you.” Susan Wood resigns in protest over the politicization of women’s health care? Ha! We’ll show her — we’ll put a vet in charge, instead.

The PP appointments are less for reasons of ideology or even rewarding the politically faithful than just in the old nyeh-nyeh spirit. You could, for example, put any number of people at the Department of Labor who are wholly unsympathetic to the labor movement — Bush has installed shoals of them already. But there is a certain arch, flippant malice to making Edwin Foulke assistant secretary in charge of the health and safety of workers.

Republican appointees who oppose the agencies to which they are assigned are a dime a dozen, but Foulke is a partner from the most notorious union-busting law firm in the country. What he does for a living is destroy the only organizations that care about workers’ health and safety.

Here’s another PP pick: put a timber industry lobbyist in as head of the Forest Service. How about a mining industry lobbyist who believes public lands are unconstitutional in charge of the public lands? Nice shot. A utility lobbyist who represented the worst air polluters in the country as head of the clean air division at the EPA? A laff riot. As head of the Superfund, a woman whose last job was teaching corporate polluters how to evade Superfund regulations? Cute, cute, cute. A Monsanto lobbyist as No. 2 at the EPA. A lobbyist for the American Petroleum Institute at the Council on Environmental Quality. And so on. And so forth.

The Federal Trade Commission was finally embarrassed enough by demands from Democratic governors to start an investigation into recent price gouging by oil companies. But the investigation will be headed by a former lawyer for ChevronTexaco. Is this fun or what? Nanny-nanny boo-boo.

The terrible lesson of Hurricane Katrina is that public policy is not a political gotcha game. The public interest is not well-served by appointing incompetents or anti-competents to positions of responsibility. Public policy is about our lives.

Here’s another example: The Violence Against Women Act expires on Oct. 1 and must be reauthorized before then. It doesn’t look good. For 10 years, this law has helped improve criminal justice and community-based responses to sexual violence and sexual assault. As result, there has been an overall decline in the incidence of women battered or killed by their partners.

But as the July-August issue of Mother Jones painfully demonstrates, domestic violence remains a hideous problem. It is both a public health and a human rights issue. Homicide is the 10th leading cause of death for women under 65. According to the Family Violence Prevention Fund, about 30 percent of American women report being physically abused by husbands or boyfriends. Every year, more than 300,000 U.S. women are raped and more than 4 million assaulted. Funding for family violence prevention was cut by $48 million this year.

I guess it would be pretty funny, on some level, to put a vet in charge of this issue, too. But let’s not. This is about people’s lives. I’ve already seen too many people staring numbly at walls, still in shock. Let’s start by getting Congress to at least reauthorize the act. The arsenal of democracy starts with the telephone, the fax machine, the e-mail, paper and pen. Just sign it, “Your constituent.”

To find out more about Molly Ivins and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate web page at www.creators.com.

COPYRIGHT 2005 CREATORS SYNDICATE INC.
Originally Published on Thursday September 22, 2005

TEN, EIGHT, THREE AND FORTY

The National Debt will approach TEN trillion by the time the next President is sworn in. Nearly EIGHT trillion of that debt, accumulated since 1776, will have been racked up by just THREE Republican Administrations: Reagan, Bush, and Bush. Even at today’s low interest rates, nearly FORTY percent of the $893 billion Americans paid in personal income tax this year went to pay the interest on the debt.

(I know I said all this yesterday – my short-term memory isn’t that bad – but I’m trying to find ways to make it sing. Or at least stark.)

THE WORK PENALTY

What the Republican leadership has managed so effectively to do is shift the tax burden from wealth to work. It used to be that an heiress who inherited $600 million would pay the same effective 39.6% top rate on her $20 million a year in dividends that a surgeon would pay on his $300,000 in ‘earned income.’ But in recent years the Republican leadership has cut her top tax rate from 39.6% to 15%, while cutting the surgeon’s top bracket from 39.6% to 35%.

Much of the heiress’s income came in the form of long-term capital gains. The Republican leadership has cut her tax on that income significantly as well, from 20% to 15%.

Her tax on municipal bond interest remains 0%. No cut was possible there.

And now the Republican leadership is hell bent on lowering the top estate tax rate on great wealth from ‘about half’ to ‘exactly zero.’

The Republican leadership doesn’t like taxes – who does? – but if we have to have them, they would at least like to see the burden shifted from wealth to work.

Laid out plainly that way, some will nod their heads in vigorous agreement with the underlying philosophy. Others will despair at what they see as the shortsightedness and immorality. That’s what makes horse races.

THE REPUBLICAN DEBT

Jeff Covey: ‘Seeing it has a bigger impact than anything you can say about it.’

☞ And this is just now. By the time we have a chance to right things, beginning in 2009, the National Debt will approach $10 trillion – nearly $8 trillion of it racked up under just three Presidents: Reagan, Bush and Bush.

THE INTEREST WE PAY ON THAT DEBT

Scott Obeck: ‘So, if my math is correct, does about 15 cents of each dollar we send to the federal government go to pay interest on the debt?’

☞ Not exactly. The interest on our National Debt – currently around $350 billion a year and headed higher – amounts to nearly 40% of the $893 billion we paid in personal income tax this year.

(Total federal revenue for the fiscal year just ending is estimated at just over $2 trillion. In addition to the personal income tax there will have been $773 billion in Social Security tax taken out of our pay – but that’s all supposed to go to pay benefits and store up a surplus for the future. Bringing up the rear: the corporate income tax, at $226 billion, and smaller items like excise taxes and the estate tax.)

THE ILLUSORY TAX CUTS

Well, we may have borrowed $8 trillion, but at least we’re all rolling in tax cuts.

Institutional Investor’s Alpha magazine (as quoted in the June 5 New York Times Sunday Magazine) reported that the average pay for the top 25 hedge fund managers in 2004 was $251 million. They can be nothing if not happy about the tax cuts. Your own cut may not have been quite as large . . . you may have earned only $10 million in 2004 or even less . . . but who can fail to favor tax cuts?

Yet tax cuts, this author argues – as much as those hedge fund managers may have needed them – are illusory. (And not just because you’re increasingly likely to get hit up for the alternative minimum tax, if you’re a working stiff.) In tiny part:

Just remember, to spend is to tax. Not for nothing did the very, very conservative economist Milton Friedman once pen a column for the Wall Street Journal entitled ‘The Taxes Called Deficits.’ (April 26, 1984) . . .

MAGNIFIQUE!

Yaakov-Oz: “MODIQUES absolutely is a word! Just not in English. But feel free to give yourself 230 points in French. (It means ‘moderate.’)”

LET THEM EAT BACON

Joe Devney: “President Bush has suspended the Davis-Bacon Act, freeing companies contracting with the federal government to rebuild New Orleans to pay their workers less than they would be required to otherwise. I assume that the companies will be contractually obligated to pass the cost savings on to the government – otherwise there is no reason to reduce the wages in the first place. The end result is that money will be taken out of the workers’ pockets and put into the federal treasury. Mr. Bush has insisted that he will not approve any tax increases to pay for the costs of hurricane Katrina. Yet he has, by this executive order, decreased the after-tax pay of some American workers whose incomes are in the $20,000-a-year range – in effect taxing them – in order to keep from having to pinch people who make millions of dollars a year.”

THE DEBT

Dan Flikkema: “Imagine we could somehow stop adding to the current National Debt and instead could begin to pay it back. Let’s say we pay back $1,000 every second of every day. Did you know it would only take us a little over 251 years to pay it all back?”

☞ Dan goes on to acknowledge that we don’t literally need to pay it all back – it’s okay for a country as rich as ours to have, in effect, a mortgage. It’s just that ours is getting out of hand.

(But here’s some good news: One of you double-checked James Musters’ math from yesterday and it seems those 8 trillion dollar bills we’ve borrowed, mainly under Reagan, Bush and Bush, would only stretch to the moon and back sixteen hundred times, not sixteen thousand.)

Hollis Polk: “I see the enormous Federal deficit, with no plans to change course while we can still maybe avoid a catastrophe. I think what the Feds will do is print money to inflate their way out of the problem. What do you think of the likelihood of that?”

☞ It is definitely possible, but the Feds may have learned it doesn’t get you out of the problem without some very nasty side effects. With inflation come higher interest rates, higher cost of carrying the debt, higher entitlement pay-outs, the likelihood of stagflation and lower stock prices (at least in the short run) so fewer capital gains tax receipts . . . inflation can balloon the deficit. The Republican economic stewardship, or lack thereof, over the last five years has weakened us in ways for which there is no easy fix. The sooner the tax cuts are rolled back on income above $200,000 or $300,000 a year, the sooner we’ll take the one obvious and relatively painless step in the right direction.

FOR THE MAN OR WOMAN WHO HAS EVERYTHING

Instead of a Rolex, this holiday season, consider a water treatment plant in Ouagadougou. What’s novel about this site is that you get to choose the specific local project you would like to help fund. Some are small enough to be funded with just a couple dozen shares of the Anadarko Petroleum you bought at $56.50 in June last year (closed $97.97 last night), or by your daughter’s high school cake sale. (All this, presumably, after working out an arrangement to share your kitchen and bathroom with the family you’ve taken in from Louisiana. It’s shaping up to be a banner year for charitable opportunities.)

And where with many charitable gifts 25 cents of each dollar may go just to raising that
dollar, with another 10 or 20 cents going to overhead, here close to 90% of what you give gets straight to the project.

If nothing else, touring this site is yet one more way to see how fortunate most of us are, by
comparison.

Although if that’s the feeling you’re after, you could just rush out to see “March of the Penguins,” which – while the penguins seem to endure it somehow – has got to be the bleakest existence on the planet. A love story? Give me a break, Morgan. It’s a story about nearly nonstop suffering. However distasteful you find my political views; however much money you may have lost buying Google puts – please don’t make me come back as an Emperor Penguin.

I just want to say that if MODIQUES were a word, I would have gotten 230 point on a single turn.

It was a thing of beauty.

I am trying to let go of my disappointment, but it may take some time.

THE OTHER REASON MIKE VOTES REPUBLICAN

Mike Wallin: ‘You neglected Monday to touch on my second reason for being Republican: If decent people are allowed to carry arms and we have a police force and judiciary that allow citizens to defend themselves, the world is a better place. Perhaps you didn’t notice that New York is a much more pleasant place after (our next President, G-d Willing) Rudy came in and cleaned it up.’

☞ But he didn’t do it by encouraging citizens to carry concealed weapons in bars and on the subway. In fact, here is Rudy on the gun issue in 1997:

Yesterday, President Clinton outlined his proposals for more stringent, federal gun licensing requirements.

His proposals include:

• prohibiting non-citizens from buying guns;

• requiring proof of residency, including photo id. and something like a utility bill in the buyers name… similar to what is required for a drivers license;

• making cop killer, or Teflon coated, armor piercing bullets illegal;

• and requiring child safety locks on the weapons of all Federal Officials to prevent these guns from ever winding up in the hands of children.

I applaud the President’s proposals, and I will support them any way I can.

I only hope that he is right, and that Congress is finally ready to recognize that the vast majority of Americans want more gun control. It makes sense. It is time. And we can no longer let special interests dominate this vitally important issue.

Democrats want gun safety. Close the gun-show loophole. Discourage the sale of assault weapons and cop killer bullets. License gun owners. That kind of thing. Republicans defeat these measures. And Republicans like Mike think we could all rest easier if we knew more people walking or driving past us, or sitting beside us at the ballgame, were armed.

THE NATIONAL DEBT

James Musters: “While on hold for tech support, I was playing with my Lotus Spreadsheet, trying to put the National Debt in proportion. Not an easy task. From the government, I found out that a dollar bill is 0.155956 meters long. The National Debt clock says today’s debt is 7,925,781,782,400 dollars. So if you taped dollar bills together end to end to form a long chain, the national debt would be 1,236,073,223 kilometers long. How far is that? Well, the moon is 384,400 kilometers away, so the national debt, strung end to end, gets to the moon and back more than 16,000 times. The sun is a lot further away, about 149,600,000 kilometers, so the debt could make four round trips. The chain of debt is longer than the circumference of the earth’s yearly orbit around the sun. Considering that the earth, traveling through space at about 67,000 miles per hour, takes a year go circle the sun, that’s one enormous chain of American debt. Astronomical, really.”

☞ As noted yesterday, the debt will be a lot bigger by the time the Republican leadership has finished inflating it. And nearly four-fifths of it will have been racked up under just three of our 43 Presidents: Reagan, Bush, and Bush. But at least assault weapons are back for sale and you can buy them at gun shows without a background check. Modiques, modiques, modiques.